Capitalism on Cruise Control

<body bgcolor="#E8FFF0"> <p>Capitalism on Cruise Control </p> <p>April 17, 2008 permalink comment e-mail I was photographed, walked through a metal detector and scanned with a hand-held device. I am surprised they didn't finger print me. My briefcase was searched. When my camera was found, I was bluntly informed I couldn't take it with me. Call it a camera Catch-22: I couldn't take it with me, but they wouldn't hold it for me. </p> <p>  "Sir, you are holding up the line." Intimidation was in the air as I walked back in the corridor and left my camera unattended on the floor. What else could I do? I then walked past the goons and into the meeting. This wasn't a top-level security briefing at the Pentagon. I'm not usually invited to those. No, it was a shareholders' meeting for one of Fidelity Investment's mutual funds. Perhaps 20 people attended. The only substantive order of business was a group of activists pleading with management to divest from corporations supporting genocide in Darfur. There was also a management-sponsored proposal to reduce from 50% to 33% the required fraction of shareholders for a quorum at shareholder meetings. Fidelity is struggling to gather sufficient proxies to achieve quorum at meetings, and this is their solution. Just 30 minutes were allotted for the entire meeting, and with another meeting scheduled immediately afterward, there wasn't a lot of flexibility. The management proposal passed with about 99% of the vote. The Darfur activists got a little over 20%. I was there to witness to the sorry state of shareholder democracy -- what I wistfully call "capitalism of cruise control." Last month, I launched the Investor Suffrage Movement with the goal of fixing corporate governance by reviving the proxy process. One of our first steps is to run proxy trials to assess if procedures still even exist for shareholders to appoint a proxy of their choosing. I own shares in the Fidelity mutual fund, and my goal had been to appoint a colleague as my proxy, so she could attend the meeting on my behalf. Last week, I called Fidelity's toll-free line and asked the friendly agent how I could do this. The call lasted 45 minutes. Most of that time, I was on hold while he desperately tried to find someone who could answer my question. Finally, he got back on the line and told me I wasn't allowed to appoint my own proxy. I could either appoint management as my proxy or attend the shareholder meeting myself. That is how I ended up in that corridor haggling with Fidelity security over a camera.   </p> <p>About fifteen minutes of the shareholder meeting was devoted to formalities and balloting. There actually were no ballots—just more proxy assignment cards, which Fidelity had us use as ballots. We had no choice, so legally even people who attended the meeting were forced to sign over their proxies to management. Perhaps two minutes were devoted to the management proposal. I asked the only question: "Is there any statutory limit on how low the quorum requirement can be set?" Fidelity's general council explained that 50% is the minimum for corporations, but the mutual fund is structured as a Massachusetts trust, for which there is no legal minimum. The balance of the meeting was devoted to the Darfur petition. A final item on the agenda was for general fund business, but time ran out. The chair announced we would skip it. I protested, as I hadn't yet raised the issue of not being allowed to appoint my own proxy. With the chair's permission, I briefly described my experience with the agent on Fidelity's toll-free line. The general council apologized for the misinformation I had received and promised to talk to me after the meeting. I made the mistake of accepting this. After the meeting, he referred me to an assistant who took my e-mail address. Suspecting I might never hear from her, I pressed for her name and number. She hesitated but did surrender them. She was Margaret Carey, associate general council. Hopefully, she is now busily drafting procedures for Fidelity shareholders to appoint their own proxies. More likely, she has forgotten I exist. I will follow-up in a week or so. If you would like to participate in proxy trials with the Investor Suffrage Movement, visit the website and become a member. Proxy season is upon us, so there isn't much time left. But if you do join, there will be plenty of opportunities to get involved during next year's proxy season. Glyn A. Holton Visit the Investor Suffrage Movement website. </p> <p>Disclaimer website: http://www.contingencyanalysis.com blog direct link: http://www.glynholton.com copyright © Contingency Analysis, 2006 - current </p> </body>